When Does the 1031 Exchange Start

When does the exchange start?
This is a good question, and something important to be aware of. Often, we receive calls from people hoping to do a 1031 exchange, but have already closed on their relinquished property. Unfortunately, in this situation they no longer qualify for a 1031 exchange.

Once you start considering selling your investment property and doing a 1031, we recommend you give us a call. We think it's important that you understand what a 1031 is and how it works, so we will take the time to discuss this with you to make sure you are prepared to begin once you enter into a contract. Once you enter into a contract, that's when we will begin to prepare the exchange. We will handle all necessary legal documentation and agreements that show you are entering into a 1031 exchange. These documents will be given to all those involved (lawyer, title company, etc.) to notify that this transaction is part of a 1031 Exchange and give instructions to ensure it is prepared within the guidelines of a 1031.

Remember, if this is not done prior to closing, the exchange cannot be done. This is because if you close prior to beginning the exchange, the IRS will see that there is a period of time when you had access to the cash from the sale. Make sure you contact us prior to closing to assure the 1031 exchange can properly get started.

Once the exchange is prepared and it is the day closing, funds from the sale of the relinquished property will be wired to us as the QI. As the Qualified Intermediary, we will hold the funds until it is time to close on the replacement property.